Gartner dispels offshoring 'myths'

IT research and analysis provider Gartner has questioned the negative coverage about offshoring in a report presented during its sourcing and IT services summit.
Written by Kristyn Maslog-Levis, Contributor
IT research and analysis provider Gartner has questioned the negative coverage about offshoring in a report presented during its sourcing and IT services summit.

The Myths and Realities of Offshoring report by Gartner analyst Bob Hayward discusses the better side of offshoring and disputes the common negative beliefs of people in the industry regarding the issue.

Hayward said he admits that some people in service-oriented roles in developed economies will lose their jobs to offshore services and that offshoring may not always be the best option to reduce costs or gain efficiencies in service-oriented processes.

He added that because of this, government and businesses need to provide safety nets and assistance to workers who are displaced.

The report pointed out common offshoring "myths", such as that offshoring has caused the loss of over 3 million jobs in the United States during the past three years; that lost jobs are never replaced; and that offshore services are the reason it took so long for new jobs to be created amidst the ongoing U.S. economic recovery.

Hayward's report also claimed that offshore services "do not create downward pressures on local wages, that a nation's competitive advantage is not eroded by exporting skilled jobs and that protecting local jobs and restricting offshore services will not be good for the nation's economy."

"Job losses to date from offshore services have been grossly exaggerated," Hayward said. Delayed job creation in the U.S. recovery had nothing to do with offshore services and more on governance reform, investor competition pressure on costs, global economic and geopolitical conditions."

Hayward pointed out that the offshoring of local application development work represents only 2 percent of the Australian market and that the government should not be protecting old jobs, but should instead support the creation of new ones.

Hayward also advised companies not to put "all their eggs into the Indian basket" since eventually, local wages will increase as the country progresses.

Many of the jobs that are being offshored now are jobs that will eventually end up being automated in the future, Hayward said. He added that although these low-level IT jobs, like coding, that are being offshored will mean lesser jobs and lesser experience for graduates, these "will soon be automated and what is considered graduate work will change as the IT industry evolves."

Hayward suggested in his report that the government and businesses should craft policies and programs to create new jobs rather than to protect old jobs. He also suggested that the government and institutions assist people who have been displaced by offshore service to return to the workforce quickly through training programs and welfare assistance.

Hayward also raised the question of changing the immigration policy since it would attract the "best and the brightest globally." Taxation and education reforms, Hayward said, will reward entrepreneurs, encourage innovators and promote free and fair trade.

"Regulations like imposing a special tax on companies that use offshore services will drive business away. Highly regulated locations have higher unemployment rate," Hayward said.

Jobs most at risk of being sent offshore include lower-level services work like certain types of computer programming, technical writers, and contact centre operators for non sensitive and non-critical functions.

Certain high-end business process outsourcing services such as network consulting and management services, market research and competitive intelligence, and product development are also at risk, according to Hayward. The research firm will share more insights on the outsourcing issue at its Singapore conference next month.

Kristyn Maslog-Levis of ZDNET Australia reported from Sydney.

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